A new bank holiday celebrating Britishness should be created and school pupils encouraged to swear allegiance to the country in an effort to combat a slide in national pride, Gordon Brown has been advised.

A report commissioned by the Prime Minister into encouraging citizenship has concluded that rebates on university fees or council tax payments should also be offered in return for voluntary work. Its author, Lord Goldsmith, argued that the proposals would encourage a national sense of belonging.

The call for school citizenship ceremonies has drawn criticism, with head teachers leading opposition to the "half-baked" proposal.

Lord Goldsmith, a former attorney general, said the new holiday, which he suggested should be held in the autumn, could begin in 2012 to tie in with the London Olympics and the Queen's diamond jubilee. He said the holiday, which would celebrate "the bond of shared citizenship" within the UK, could be modelled on Australia Day, when Australians are encouraged to mark their history and national achievements.

Events in Scotland, Wales and Northern Ireland could be tailored to reflect their identities and a special Honours List marking the achievements of ordinary citizens could be published on the day.

Lord Goldsmith recommended the introduction of ceremonies for all school-leavers to mark "the passage from being a student of citizenship to an active citizen". He said he favoured an oath of allegiance to the Queen but the statement could alternatively be a pledge of loyalty to Britain.

The ceremonies, similar to those for recent immigrants, could be staged in such well-known buildings as Tate Britain and the National Gallery in London or Edinburgh Castle.

Lord Goldsmith said: "I absolutely expect there will be scepticism about it. But there was scepticism about the proposal to have citizenship ceremonies for new applicants and they have gone extremely well." He said Britain did not face a crisis of shared citizenship, but added that national pride had declined over the past 20 years, particularly among the young. He warned that one third or more of black people did not identify with their home country.

The former minister set out measures for encouraging levels of volunteering as a way of building bonds. Students could be rewarded by cuts in university fees, while householders could be given council tax discounts in return for setting up recycling schemes or teaching children to read in schools. He also floated the idea of setting up a "deliberation day" before elections to encourage political debate.

The proposal for citizenship ceremonies was condemned by the Association of School and College Leaders. John Dunford, its general secretary, said: "This is a half-baked idea, which should be allowed quietly to go mouldy. Schools will reject it as an un-British idea imported from America, which does not fit."